Political funding talks suspended

Sir Hayden Phillips, who has been chairing the hard-fought discussions between Labour, the Tories and the Liberal Democrats for five months, suspended proceedings after becoming convinced no agreement was currently possible.

However, he insisted that the "public interest" still required a deal, and said he believed some progress had been made.

The announcement, which followed a 90-minute showdown meeting between the parties' lead negotiators, sparked an immediate blame game over who was responsible for the impasse.

Justice Secretary Jack Straw accused David Cameron of being "unwilling to negotiate", saying: "We greatly regret that these talks have been suspended as a result of the Conservative Party's unwillingness to negotiate on a draft agreement.

"We had understood that all parties had thought in good faith that this draft agreement was the basis of a comprehensive settlement.

"We will now take time to reflect on next steps."

But the Tories hit back by insisting that Labour's close links to the trade unions were blocking an agreement.

Frontbencher Francis Maude said: "We are disappointed that the trade unions still hold Labour over a barrel.

"The unions are running the Labour party from the back seat, giving them control over Government policy.